Scope Ratings has today published its updated rating methodology for retail and wholesale corporates, which clarifies and refines its analytical approach while keeping the core principles unchanged.

Scope did not received comments from market participants during the call for comment phase. The final version of this rating methodology has been published today. The methodology is now final.

Download the methodology here.

Methodology highlights

The update of the methodology includes the following adjustments:

• Extended guidance on the assessment of retail and wholesale corporates’ business risk profiles, including on the ‘A’ and ‘AA and above’ as well as ‘CCC and below’ categories
• Renaming ‘Non-cyclical retail’ and ‘Cyclical retail’ industry risk profile categories to respectively ‘non-discretionary’ and ‘discretionary’; criterion ‘market share’ now called ‘market position’
• Modification of the use of the ‘country retail strength’ criterion into a contextual assessment of the developmental phases and sizes of countries, in order to enhance the assessment of a retailer’s main country of operation and distribution channel diversification. Changes in the assessment of countries have also been conducted.
• Adjustment to the geographical diversification assessment to give better granularity on investment grade levels
• Clarification and recalibration of the Scope-adjusted EBITDA return on assets calculation to lessen the impact of seasonality on the ratio and more accurately track the change in the asset balance over time
• Recalibration of the lowest range of the Scope-adjusted EBITDA margin
• Introduction of restricted cash as a credit metrics adjustment
• Inclusion of reverse factoring into the general liquidity assessment
• Clarification on our treatment of captive finance operations
• Minor editorial changes

Rating impact

The updated methodology will not affect existing issuer or debt ratings corporates rated used the methodology.